Today I want to talk about piracy and music.
What is piracy? Piracy is the act of stealing an artist's work
without any intention of paying for it. I'm not talking about
Napster-type software. I'm talking about major label recording
contracts.

I want to start with a story about rock bands
and record companies, and do some recording-contract math. This
story is about a bidding-war band that gets a huge deal with a
20 percent royalty rate and a million-dollar advance. (No bidding-war
band ever got a 20 percent royalty, but whatever.) This is my
"funny" math based on some reality and I just want to
qualify it by saying I'm positive it's better math than what Edgar
Bronfman Jr.,the president and CEO of Seagram, [which owns Polygram]
would provide. What happens to that million dollars?

They spend half a million to record their album.
That leaves the band with $500,000. They pay $100,000 to their
manager for 20 percent commission. They pay $25,000 each to their
lawyer and business manager. That leaves $350,000 for the four
band members to split. After $170,000 in taxes, there's $180,000
left. That comes out to $45,000 per person. That's $45,000 to
live on for a year until the record gets released.

The record is a big hit and sells a million
copies. (How a bidding-war band sells a million copies of its
debut record is another rant entirely, but it's based on any basic
civics-class knowledge that any of us have about cartels. Put
simply, the antitrust laws in this country are basically a joke,
protecting us just enough to not have to rename our park service
the Phillip Morris National Park Service.

So, this band releases two singles and makes
two videos. The two videos cost a million dollars to make and
50 percent of the video production costs are recouped out of the
band's royalties. The band gets $200,000 in tour support, which
is 100 percent recoupable. The record company spends $300,000
on independent radio promotion. You have to pay independent promotion
to get your song on the radio; independent promotion is a system
where the record companies use middlemen so they can pretend not
to know that radio stations -- the unified broadcast system --
are getting paid to play their records. All of those independent
promotion costs are charged to the band. Since the original million-dollar
advance is also recoupable, the band owes $2 million to the record
company.If all of the million records are sold at full price with
no discounts or record clubs, the band earns $2 million in royalties,
since their 20 percent royalty works out to $2 a record. Two million
dollars in royalties minus $2 million in recoupable expenses equals
... zero!

How much does the record company make? They
grossed $11 million. It costs $500,000 to manufacture the CDs
and they advanced the band $1million. Plus there were $1 million
in video costs, $300,000 in radio promotion and $200,000 in tour
support. The company also paid $750,000 in music publishing royalties.
They spent $2.2 million on marketing. That's mostly retail advertising,
but marketing also pays for those huge posters of Marilyn Manson
in Times Square and the street scouts who drive around in vans
handing out black Korn T-shirts and backwards baseball caps. Not
to mention trips to Scores and cash for tips for all and sundry.
Add it up and the record company has spent about $4.4 million.
So their profit is $6.6 million; the band may as well be working
at a 7-Eleven.

Of course, they had fun. Hearing yourself on
the radio, selling records, getting new fans and being on TV is
great, but now the band doesn't have enough money to pay the rent
and nobody has any credit. Worst of all, after all this, the band
owns none of its work they can pay the mortgage forever but they'll
never own the house. Like I said: Sharecropping.

Our media says, "Boo hoo, poor pop stars,
they had a nice ride. Fuck them for speaking up"; but I say
this dialogue is imperative. And cynical media people, who are
more fascinated with celebrity than most celebrities, need to
reacquaint themselves with their value systems.

When you look at the legal line on a CD, it
says copyright 1976 Atlantic Records or copyright 1996 RCA Records.
When you look at a book, though, it'll say something like copyright
1999 Susan Faludi, or David Foster Wallace. Authors own their
books and license them to publishers. When the contract runs out,
writers gets their books back. But record companies own our copyrights
forever. The system's set up so almost nobody gets paid.

* The RIAA
*

Last November, a Congressional aide named Mitch
Glazier, with the support of the RIAA, added a "technical
amendment" to a bill that defined recorded music as "works
for hire" under the 1978 Copyright Act. He did this after
all the hearings on the bill were over. By the time artists found
out about the change, it was too late. The bill was on its way
to the White House for the president's signature. That subtle
change in copyright law will add billions of dollars to record
company bank accounts over the next few years --billions of dollars
that rightfully should have been paid to artists. A "work
for hire" is now owned in perpetuity by the record company.

Under the 1978 Copyright Act, artists could reclaim the copyrights
on their work after 35 years. If you wrote and recorded "Everybody
Hurts," you at least got it back to as a family legacy after
35 years. But now, because of this corrupt little pisher, "Everybody
Hurts" never gets returned to your family, and can now be
sold to the highest bidder. Over the years record companies have
tried to put "work for hire" provisions in their contracts,
and Mr. Glazier claims that the "work for hire" only
"codified" a standard industry practice. But copyright
laws didn't identify sound recordings as being eligible to be
called "works for hire," so those contracts didn't mean
anything. Until now, writing and recording "Hey Jude"
is now the same thing as writing an English textbook, writing
standardized tests, translating anovel from one language to another
or making a map. These are the types of things addressed in the
"work for hire" act. And writing a standardized test
is a work for hire. Not making a record. So an assistant substantially
altered a major law when he only had the authority to make spelling
corrections. That's not what I learned about how government works
in my high school civics class.

Three months later, the RIAA hired Mr. Glazier
to become its top lobbyist at a salary that was obviously much
greater than the one he had as the spelling corrector guy.The
RIAA tries to argue that this change was necessary because of
a provision in the bill that musicians supported. That provision
prevents anyone from registering a famous person's name as a Web
address without that person's permission. That's great. I own
my name, and should be able to do what I want with my name.But
the bill also created an exception that allows a company to take
a person's name for a Web address if they create a work for hire.
Which means a record company would be allowed to own your Web
site when you record your "work for hire" album. Like
I said: Sharecropping.

Although I've never met any one at a record
company who"believed in the Internet," they've all been
trying to cover their assesby securing everyone's digital rights.
Not that they know what to dowith them. Go to a major label-owned
band site. Give me a dollar forevery time you see an annoying
"under construction" sign. I used to pesterGeffen (when
it was a label) to do a better job. I was totally ignored fortwo
years, until I got my band name back. The Goo Goo Dolls are struggling
togain control of their domain name from Warner Bros., who claim
they ownthe name because they set up a shitty promotional Web
site for the band.

Orrin Hatch, songwriter and Republican senator
from Utah, seems to be the only person in Washington with a progressive
view of copyright law. One lobbyist says that there's no one in
the House with a similar view and that "this would have never
happened if Sonny Bono was still alive."By the way, which
bill do you think the recording industry used for this amendment?The
Record Company Redefinition Act? No. The Music Copyright Act?
No. The Work for Hire Authorship Act? No. &nbsp;How about
the Satellite Home Viewing Act of 1999? Stealing our copyright
reversions in the dead of night while no one was looking, and
with no hearings held, is piracy.

It's piracy when the RIAA lobbies to change
the bankruptcy law to make it more difficult for musicians to
declare bankruptcy. Some musicians have declared bankruptcy to
free themselves from truly evil contracts. TLC declared bankruptcy
after they received less than 2 percent of the $175 million earned
by their CD sales. That was about 40 times less than the profit
that was divided among their management, production and record
companies. Toni Braxton also declared bankruptcy in 1998. She
sold $188 million worth of CDs, but she was broke because of a
terrible recording contract that paid her less than 35 cents per
album. Bankruptcy can be an artist's only defense against a truly
horrible deal and the RIAA wants to take it away.

Artists want to believe that we can make lots
of money if we're successful.But there are hundreds of stories
about artists in their 60s and 70s who are broke because they
never made a dime from their hit records. And real success is
still a long shot for a new artist today. Of the 32,000 new releases
each year, only 250 sell more than10,000 copies. And less than
30 go platinum.

The four major record corporations fund the
RIAA. These companies are rich and obviously well-represented.
Recording artists and musicians don't really have the money to
compete. The 273,000 working musicians in America make about $30,000
a year. Only 15 percent of American Federation of Musicians members
work steadily in music. But the music industry is a $40 billion-a-year
business. One-third of that revenue comes from the United States.
The annual sales of cassettes, CDs and video are larger than the
gross national product of 80 countries. &nbsp; Americans have
more CD players, radios and VCRs than we have bathtubs.

Story after story gets told about artists --
some of them in their 60s and 70s, some of them authors of huge
successful songs that we all enjoy, use and sing -- living in
total poverty, never having been paid anything. Not even having
access to a union or to basic health care. Artists who have generated
billions of dollars for an industry die broke and un-cared for.
And they're not actors or participators. They're the rightful
owners, originators and performers of original compositions.

This is piracy.

* Technology
is not piracy *

This opinion is one I really haven't formed
yet, so as I speak about Napster now, please understand that I'm
not totally informed. I will be the first in line to file a class
action suit to protect my copyrights if Napster or even the far
more advanced Gnutella doesn't work with us to protect us. I'm
on [Metallica drummer] Lars Ulrich's side, in other words, and
I feel really badly for him that he doesn't know how to condense
his case down to a sound-bite that sounds more reasonable than
the one I saw today.

I also think Metallica is being given too much
grief. It's anti-artist, for one thing. An artist speaks up and
the artist gets squashed: Sharecropping. Don't get above your
station, kid. It's not piracy when kids swap music over the Internet
using Napster or Gnutella or Freenet or iMesh or beaming their
CDs into a My.MP3.com or MyPlay.com music locker. It's piracy
when those guys that run those companies make side deals with
the cartel lawyers and label heads so that they can be "the
labels' friend," and not the artists'. Recording artists
have essentially been giving their music away for free under the
old system, so new technology that exposes our music to a larger
audience can only be a good thing. Why aren't these companies
working with us to create some peace? There were a billion music
downloads last year, but music sales are up. Where's the evidence
that downloads hurt business? Downloads are creating more demand.

Why aren't record companies embracing this
great opportunity? Why aren't they trying to talk to the kids
passing compilations around to learn what they like? Why is the
RIAA suing the companies that are stimulating this new demand?
What's the point of going after people swapping cruddy-sounding
MP3s? Cash! Cash they have no intention of passing onto us, the
writers of their profits.

At this point the "record collector"
geniuses who use Napster don't have the coolest most arcane selection
anyway, unless you're into techno. Hardly any pre-1982 REM fans,
no '60s punk, even the Alan Parsons Project was under represented
when I tried to find some Napster buddies. For the most part,
it was college boy rawk without a lot of imagination. Maybe that's
the demographic that cares -- and in that case, My Bloody Valentine
and Bert Jansch aren't going to get screwed just yet. There's
still time to negotiate.

* Destroying
traditional access *

Somewhere along the way, record companies figured
out that it's a lot more profitable to control the distribution
system than it is to nurture artists. And since the companies
didn't have any real competition, artists had no other place to
go. Record companies controlled the promotion and marketing; only
they had the ability to get lots of radio play, and get records
into all the big chain store. That power put them above both the
artists and the audience. They own the plantation.

Being the gatekeeper was the most profitable
place to be, but now we're in a world half without gates. The
Internet allows artists to communicate directly with their audiences;
we don't have to depend solely on an inefficient system where
the record company promotes our records to radio, press or retail
and then sits back and hopes fans find out about our music.

Record companies don't understand the intimacy
between artists and their fans. They put records on the radio
and buy some advertising and hope for the best. Digital distribution
gives everyone worldwide, instant access to music.

And filters are replacing gatekeepers. In a
world where we can get anything we want, whenever we want it,
how does a company create value? By filtering. In a world without
friction, the only friction people value is editing. A filter
is valuable when it understands the needs of both artists and
the public. New companies should be conduits between musicians
and their fans.

Right now the only way you can get music is
by shelling out $17. In a world where music costs a nickel, an
artist can "sell" 100 million copies instead of just
a million.

The present system keeps artists from finding
an audience because it has too many artificial scarcities: limited
radio promotion, limited bin space in stores and a limited number
of spots on the record company roster. The digital world has no
scarcities. There are countless ways to reach an audience. Radio
is no longer the only place to hear a new song. And tiny mall
record stores aren't the only place to buy a new CD.

* I'm leaving
*

Now artists have options. We don't have to
work with major labels anymore, because the digital economy is
creating new ways to distribute and market music. And the free
ones amongst us aren't going to. That means the slave class, which
I represent, has to find ways to get out of our deals. This didn't
really matter before, and that's why we all stayed.

I want my seven-year contract law California
labor code case to mean something to other artists. Universal
Records sues me because I leave because my employment is up, but
they say a recording. When I agreed to allow a large cola company
to promote a live show, I couldn't have been more miserable. They
screwed up every single thing imaginable. The venue was empty
but sold out. There were thousands of people outside who wanted
to be there, trying to get tickets. And there were the empty seats
the company had purchased for a lump sum and failed to market
because they were clueless about music.

It was really dumb. You had to buy the cola.
You had to dial a number. You had to press a bunch of buttons.
You had to do all this crap that nobody wanted to do. Why not
just bring a can to the door? On top of all this, I felt embarrassed
to be an advertising agent for a product that I'd never let my
daughter use. Plus they were a condescending bunch of little guys.
They treated me like I was an ungrateful little bitch who should
be groveling for the experience to play for their damn soda.

I ended up playing without my shirt on and
ordering a six-pack of the rival cola onstage. Also lots of unwholesome
cursing and nudity occurred. This way I knew that no matter how
tempting the cash was, they'd never do business with me again.
If you want some little obedient slave content provider, then
fine. But I think most musicians don't want to be responsible
for your clean-cut, wholesome, all-American, sugar corrosive cancer-causing,
all white people, no women allowed sodapop images.

Nor, on the converse, do we want to be responsible
for your vice-inducing, liver-rotting, child-labor-law-violating,
all white people, no-women-allowed booze images. So as a defiant
moody artist worth my salt, I've got to think of something else.
Tampax, maybe.

* Money
*

As a user, I love Napster. It carries some
risk. I hear idealistic business people talk about how people
that are musicians would be musicians no matter what and that
we're already doing it for free, so what about copyright?

Please. It's incredibly easy not to be a musician.
It's always a struggle and a dangerous career choice. We are motivated
by passion and by money. That's not a dirty little secret. It's
a fact. Take away the incentive for major or minor financial reward
and you dilute the pool of musicians. I am not saying that only
pure artists will survive. Like a few of the more utopian people
who discuss this, I don't want just pure artists to survive.

Where would we all be without the trash? We
need the trash to cover up our national depression. The utopians
also say that because in their minds "pure" artists
are all Ani DiFranco and don't demand a lot of money. Why are
the utopians all entertainment lawyers and major label workers
anyway? I demand a lot of money if I do a big huge worthwhile
job and millions of people like it, don't kid yourself. In economic
terms, you've got an industry that's loathsome and outmoded, but
when it works it creates some incentive and some efficiency even
though absolutely no one gets paid.

We suffer as a society and a culture when we
don't pay the true value of goods and services delivered. We create
a lack of production. Less good music is recorded if we remove
the incentive to create it.

Music is intellectual property with full cash
and opportunity costs required to create, polish and record a
finished product. If I invest money and time into my business,
I should be reasonably protected from the theft of my goods and
services. When the judgment came against MP3.com, the RIAA sought
damages of $150,000 for each major-label-"owned" musical
track in MP3's database. Multiply by 80,000 CDs, and MP3.com could
owe the gatekeepers $120 billion.

But what about the Plimsouls? Why can't MP3.com
pay each artist a fixed amount based on the number of their downloads?
Why on earth should MP3.com pay $120 billion to four distribution
companies, who in most cases won't have to pay a nickel to the
artists whose copyrights they've stolen through their system of
organized theft?

It's a ridiculous judgment. I believe if evidence
had been entered that ultimately it's just shuffling big cash
around two or three corporations, I can only pray that the judge
in the MP3.com case would have seen the RIAA's case for the joke
that it was.

I'd rather work out a deal with MP3.com myself,
and force them to be artist-friendly, instead of being laughed
at and having my money hidden by a major label as they sell my
records out the back door, behind everyone's back.

How dare they behave in such a horrified manner
in regard to copyright law when their entire industry is based
on piracy? When Mister Label Head Guy, whom my lawyer yelled at
me not to name, got caught last year selling millions of "cleans"
out the back door. "Cleans" being the records that aren't
for marketing but are to be sold. Who the fuck is this guy? He
wants to save a little cash so he fucks the artist and goes home?
Do they fire him? Does Chuck Phillips of the LA Times say anything?
No way! This guy's a source! He throws awesome dinner parties!
Why fuck with the status quo? Let's pick on Lars Ulrich instead
because he brought up an interesting point!

* Conclusion
*

I'm looking for people to help connect me to
more fans, because I believe fans will leave a tip based on the
enjoyment and service I provide. I'm not scared of them getting
a preview. It really is going to be a global village where a billion
people have access to one artist and a billion people can leave
a tip if they want to.

It's a radical democratization. Every artist
has access to every fan and every fan has access to every artist,
and the people who direct fans to those artists. People that give
advice and technical value are the people we need. People crowding
the distribution pipe and trying to ignore fans and artists have
no value. This is a perfect system.

If you're going to start a company that deals
with musicians, please do it because you like music. Offer some
control and equity to the artists and try to give us some creative
guidance. If music and art and passion are important to you, there
are hundreds of artists who are ready to rewrite the rules.

In the last few years, business pulled our
culture away from the idea that music is important and emotional
and sacred. But new technology has brought a real opportunity
for change; we can break down the old system and give musicians
real freedom and choice.

A great writer named Neal Stephenson said that
America does four things better than any other country in the
world: rock music, movies, software andhigh-speed pizza delivery.
All of these are sacred American art forms. Let's return to our
purity and our idealism while we have this shot.

Warren Beatty once said: "The greatest
gift God gives us is to enjoy the sound of our own voice. And
the second greatest gift is to get somebody to listen to it."